Pensions

Can States Reduce Unreasonable Pensions? California Supreme Court Will Review

The 'California Rule' is a staple of public sector retirement systems, but could this be its undoing? Many states and cities should hope so.

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PAUL SAKUMA/POOL/EPA/Newscom

The California Supreme Court will review a lower court ruling that tossed a longstanding rule preventing public sector pensions from being reduced in any way.

It's a case that could have far-reaching consequences. The ruling would apply only to California, but if the state Supreme Court decides to uphold a lower court ruling that pension benefits can be reduced in some circumstances, it would be an important signal to the many other states grappling with unsustainable pension burdens and similar rules forbidding benefit cuts. It would also signal that courts are willing to reconsider the balance between public workers and the states (and the taxpayers in those states) writing their checks.

"A ruling that works against the California Rule would certainly be noticed in other places," said Len Gilroy, director of government refom at the Reason Foundation, which publishes this blog. "Certainly, you have state courts that watch each other in terms of interpretation and precedent."

The case has its origins in a pension reform measure passed in 2012 by the California state legislature. Marin County, just north of San Francisco, used that law to reduce pension benefits for some of their employees by refusing to allow them to cash-in unused vacation days, sick days, and other benefits in exchange for a larger pension payout. This is known as "pension spiking" because it allows employees to claim a significantly higher final salary prior to retirement—the basis for benefits in many pension systems.

In August, a state appeals court ruled that Marin County was within its authority to make those changes as a way to reduce pension spiking, but that wasn't all. In the unanimous opinion, Judge James Richman seemingly opened the door to further reforms that could help state and local governments get their massive pension debts under control.

"While a public employee does have a 'vested right' to a pension," he wrote. "That right is only to a 'reasonable' pension—not an immutable entitlement to the most optimal formula of calculating a pension. And the legislature may, prior to an employee's retirement, alter the formula, thereby reducing the anticipated pension."

As long as those modifications do not deprive public workers of "reasonable" pensions, Richman concluded, they do not violate California's constitutional prohibition against reducing pension benefits—a measure known as the "California Rule" that can be found in several other states, either as a constitutional provision or a state law.

Labor unions appealed that ruling and the state's highest court decided on Nov. 22 to accept the appeal. A ruling isn't likely until next year.

Either way, the outcome will be important for other states.

"California because of its size tends to be a bellwether state in many areas including public pensions," Rick Dreyfuss, a retired actuary and senior fellow on pension issues for the Commonwealth Foundation, a Pennsylvania-based think tank, told Reason via email. "Therefore, I would expect the ruling would be used by the prevailing side to further leverage a similar outcome in other states."

If the California Supreme Court upholds the lower court ruling, Dreyfuss said, it would introduce a whole new dimension to policy discussions over pensions: the question of what counts as a "reasonable" one.

The answer to that question is anyone's guess at the moment, but it could mean the end of the gravy train for many public workers. According to data from Transparent Califrornia, a project of the Nevada Policy Research Group, more than 20,000 retired public workers in California pulled down more than $100,000 in retirement benefits during 2015. Meanwhile, the CalPERS pension fund is more than $139 billion in the red, an amount that would require every man, woman, and child in California to pay $11,000 if it were divided evenly.

Denting the power of the California Rule would be a significant step towards helping cities and states get out from under the crushing debt of future pension bills.

As Steve Greenhut wrote in Reason shortly after the August ruling in the appeals court, the so-called California Rule isn't really a rule, but "a precedent derived from a variety of rulings that date back to 1955. Ultimately, it says that once a legislative body (city council, board of supervisors, the state Legislature) grants a pension-benefit increase, that increase is indeed immutable; it can never be rolled back. Employees can never be forced to contribute more to their pension plan unless they get something of equal or greater value in return."

In short: under the California Rule, states are obligated to come up with the money to pay their pension promises, no matter what other services have to be reduced or what taxes must be raised.

If the California Supreme Court upholds Judge Richman's ruling, "the legal door will be open for Californians to begin to take reasonable actions to save pension systems and local governments from fiscal disaster," said former San Jose Mayor Chuck Reed, who now serves as a board member on the Retirement Security Initiative, a national group working to ensure the sustainability of public pension plans.

"The importance of it is the flexibility that you have as an employer to make prudent benefit adjustments relevant to circumstances like the solvency of the fund," said Gilroy. "That's an important thing."

Illinois, which has more than $110 billion of unfunded pension debt, the highest such total in the country, discovered the hard way how the California Rule can limit that flexibility. It's one of several states to have a version of the California Rule written directly into the state constitution, and it was that constitutional prohibition against reducing pension benefits that sank a 2013 pension effort by Gov. Pat Quinn to reduce annual cost of living adjustments for Illinois public workers.

Without changes, Illinois could be the first state to go over the pension cliff, but New Jersey and others are close behind. Chicago is already getting close to the edge. In California, the cities of Stockton and Vallejo have gone through bankruptcy to deal with pension costs.

Striking a legal blow against the so-called California Rule won't fix the pension crisis, but might make the problem a little easier to tackle.

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80 responses to “Can States Reduce Unreasonable Pensions? California Supreme Court Will Review

  1. How about a ruling that public service unions are a form of organized crime?

    1. Baby steps.

      1. OK. Terrorists then.

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  2. “California because of its size tends to be a bellwether state in many areas including public pensions,” Rick Dreyfuss, a retired actuary and senior fellow on pension issues for the Commonwealth Foundation, a Pennsylvania-based think tank, told Reason via email. “Therefore, I would expect the ruling would be used by the prevailing side to further leverage a similar outcome in other states.”

    Maybe not following their lead would also be a good idea for the rest of the union. I mean, they want to secede, for pity’s sake! I hear Illinois is doing some interesting things with insolvency.

  3. So which is it? Is California’s pension debt the largest at $139 billion, or Illinois with $110 billion?

    1. California in absolute terms, Illinois per capita.

      1. Illinois per capita amount is over $8K per person, whereas California’s is roughly $5.5K per capita. That’s using the $200 billion public pension figure, not the CalPers only $139 amount.

    2. Ask the politicians, who failed to make the required payments to the pension fund.
      They are the ones to blame, here.

  4. I’ve never quite understoood how that spiking works. I know “a” version of the story, that the worker stops taking vacation, sick time, etc, the last few years, then gets paid all that saved-up pay on retirement, thus bumping the final year’s pay up enormously, and that is what pensions are based on, the final year’s pay. This isn’t counting the cops who suddenly get disabled in the last month or two.

    But why does the pension base include vacation and sick pay and all the other malarkey? I mean … I know *why*, it’s unions, duh. But what’s the rationale, what nonsense did the legislators subscribe to to justify such nonsense? SS benefits are entirely on real pay, you can’t game SS the same way.

    1. See the first comment above for a clue.

      1. I know that, I said that. It doesn’t explain what rationale legislators used.

        1. “It doesn’t explain what rationale legislators used.”

          Buying votes with taxpayer money.

          1. Oh that’s a fine rationale with each other. What public rationale?

            1. What public rationale?

              “Heroes”, “servants”, etc. Mostly they don’t bother because they don’t have to – that’s how well the game works.

            2. In a one-party state that passes over a thousand bills on the last few days of a legislative session, there’s no real need for a public rationale.

            3. It wasn’t the result of reasoning about how to best govern. It was fairly pure corruption. The unions are a powerful interest group in california. Such gifts are to get their endorsement.

              Plus they passed the worst increases during the boom years of a bubble, thinking like fools that tax revenues would continue at that stupid rate indefinitely hence pensions can be stupidly increased too.

              1. http://www.latimes.com/project…..avis-deal/

                “If you’re asking me, with everything I’ve learned in the last 17 years, would I have signed SB 400?. no, I would not have signed it,” Davis, now 73, said in a recent interview at his Century City law office.

                oops.

        2. The..uh…er……philosphy is that with a defined benefit pension being based on a percentage of earnings ratio, “earnings’ includes any cash compensation. Accrued sick, vacation, etc counts, when it is paid out.

          Hey, I live in California. I work in local government. Although, we do NOT participate in CalPERS.

          This is a universally accepted practice here. And, it really got out of control under Governor Davis.

          This article is an excellent summary of how it came to be and how it works. And why it’s completely insane.

          http://padailypost.com/pensions1.html

          What I still find amazing though is, while we continue to argue about the payout costs of these giveaway public pensions, many of them, particularly for safety workers, also include 100% Medical coverage for the retiree and dependents. That can cost $25,000/year on top of the pension!

    2. Because they got away with it since the politicians did not stop them and many helped. Plus it helps when the unions represent what many think are vital services, though many here including me don’t think they are that vital. Its show how far they have gone when even FDR was opposed to government unions

      The fact that no pension system can last long when you pay the retired more then the workers and even more then the taxpayers

    3. One could game s.s. by having a huge final year salary but s.s. benefits are calculated, if I remember correctly, over your 35 years earnings, not last three years like many public pensions. I know of many cops who saved up vacation, sick leave, etc. until their retirement year and also volunteered for lots of overtime )”sure I’ll be happy to work Christmas Day at double time”). Pensions should be based on base pay and averaged over many more years than the last three. I remember being advised, when I started out my career in the private sector, to save for retirement as one’s pension was expected to cover only a third of one’s retirement needs, with s.s. taking another third. I know a few public sector folks, teachers mostly, whose pensions and s.s. exceed what they were making before retirement.

      1. Wholeheartedly disagree! Defined benefit pensions should be eliminated in the public sector. The very concept implies that the pension board is prescient. It is spending other people’s money to fulfill a fantasy. It shifts all risk and burden to the taxpayers.

        Defined contribution plans? O.K. Any risk remains with the employee and not the taxpayer. That’s how the rest of the world lives.

    4. I think they simply used the standard rationale: FYTW.

    5. Mostly because unions always favor the older workers at the expense of the newer ones. Also, nobody reads past the jump in news stories, and only base salaries make the front page. Imagine your a city commission negotiating with a union. Their members want more money than your constituency will really accept, but your constituents also want you to pay the cops. You say, “hey, help me out. I can’t pay your guys $50000 base. But I can make sure that we hire five fewer people than we really need, so there will be plenty of overtime.”

    6. These additional payments don’t always “spike” the pension payments, nor do all pensions use the last year of pay as the basis for the benefit. That’s being floated to boost their anti-Constitutional position that the contract between the employers and the employees can be unilaterally altered.
      My public pension was base on the “best twelve months” of base earnings during the last three years, with no addition for unused sick, vacation or overtime pay.
      The pension increases that public employees obtain is, usually, in lieu of pay raises – the politicians want to put off the money that the employees would accept, to a later date, when they will cry poor-mouth and try to deny both.
      As an aside – many public jobs don’t have the required number of employees to fill all positions, if everyone uses all their sick and vacation leaves, thus the saving of those benefits is encouraged. Hiring workers on overtime, because regular-pay benefits don’t have to be paid, actually costs the government less than hiring enough people, to fill all positions.

  5. California’s constitutional prohibition against reducing pension benefits

    You bloody fools.

    1. It is, actually, a US Constitutional prohibition.
      But why inject facts into a good anti-worker screed.

  6. “While a public employee does have a ‘vested right’ to a pension,” he wrote. “That right is only to a ‘reasonable’ pension?not an immutable entitlement to the most optimal formula of calculating a pension. And the legislature may, prior to an employee’s retirement, alter the formula, thereby reducing the anticipated pension.”

    With those bolded qualifications, that seems reasonable.

    In a defined contribution plan this wouldn’t be a problem. But, of course, if it weren’t for the pension plan, California would have trouble attracting the excellent talent we have working in our government.

    1. Allowing full benefits of retirement at age 50 is insanity. Even the IRS actuarial tables say an average male will live to be 86 today. That would be 36 years retired based on 30 years or less working.

      Insanity I tell you.

      When I want to offend my firemand and cop buddies, I bring this up. Predictably they respond by saying that the job is physically demanding and by age 50 you can’t do it anymore. To which I respond, go tell that to the auto mechanics, the roofers and the carpenters.

      I have many friends from the trades who complain, as do I, about the physical aliments that come with age. And yet, we keep working. We get promoted to a desk job or find another line of work. Retiring isn’t an option. We don’t have the 3P plan. Because, if we did, our companies would be out of business.

      1. I doubt you say this, or get that argument, because very few, if any, public sector jobs have full benefits of retirement at age 50. Another myth perpetrated by the anti-Constitutionalists.
        Auto mechanics, roofers, carpenters and the rest of the trades, while doing physical work, don’t have the demand on their bodies that do firefighters and police.
        I don’t know what the 3P plan is but, if you were unionized, you might have a similar defined benefit plan, as could anyone, who sets aside enough for the earnings on an investment account to pay a yearly dividend of whatever size you arrange.
        It is not “mad science” that sustains pension systems, it is having the required contributions and sound investments, to pay out what is promised. The public employees pay the share they are required to. The pension fund does it’s investments. It is the politicians end of payments that gets the short shrift. And, now, they are using misinformation to blame those, who hold no blame.

  7. The court will order the turnip to bleed.

  8. Fire fighters in my northern California city retire with an average pension of $128,000 plus lifetime health care benefits. What they actually do is run an ambulance service since fire fighting accounts for 3% of their activities.

    1. But if they are like my local firemen they have to send a fire truck with every ambulance because something

      1. And the cops got to show up too.

        My mother had an neighbor die in their sleep and it seemed like every emergency vehicle in the area was was sent. The blocked the road for hours and 95% of the responders just stood around talking.

        1. It’s funny how that kind of evidence is right in people’s faces and they still don’t connect the dots. There’s just too many of these guys. I checked my towns’s website, we have 12 officers (excluding the chief, but including a detective) for a town of 4000. I grew up in a similar size town, and 40 years ago we had 3 cops for a town of 3000.

          1. Run for office on a “I’ll reduce the number of cops we have” platform.
            It is the people, you vote into office, that make these kinds of decisions. Sometimes there are state mandates, that play a role, too.
            In case you don’t know – the public employees are the last ones asked if they want their number increased, and are virtually NEVER listened to.

      2. in my Northern Cali town if you send one truck you are required to send two this is for all calls even if its a little old lady who fell on the sidewalk.

      3. The firefighters unions got that put in their contracts. If an ambulance is called, they have to respond too. As fires are relatively rare, they wanted to get into the EMT business. And, to deal with the competition from the private sector, they just added to their protocol in their union contracts.

        And boy, do they get defensive if you bring this up. They like being up there on that pedestal that a public blinded by rose colored glasses puts them on. Just ask them. They have dangerous jobs and, they are all heros.

        1. You don’t know what you are talking about, but please, continue.

    2. See, it’s comments (and thoughts) like this that ensure you don’t get elected to those “Fire Protection Districts!”

    3. But that’s a pretty important 3%.
      Ever see a block of houses where not enough firefighters arrived on the scene in a timely manner?
      I have.
      Well, actually a block of burned out buildings, mostly homes.
      The major damage that comes from earthquakes is from the fires that they cause – 1/3 of San Francisco in 1906.
      As for all those medical calls – they only go when people ask them to, and are usually pretty happy when they arrive.
      I guess your preference is for people to not have anyone to call for help – a lot of dead people, with burned-out homes.
      What a prince, you are!

  9. it would introduce a whole new dimension to policy discussions over pensions: the question of what counts as a “reasonable” one.

    A number based on a career earnings average might be helpful.

    1. They can change whatever they want, but ONLY FOR NEW HIRES, where the contract is first entered into.
      From that point, forward, both sides must agree to any changes.
      In your line of work, do you think it fair that you agree to provide a certain amount of work, for a promised payment, only to have the other side say “Oh sorry, we don’t have the money – here’s a “reasonable” amount for you”. Now imagine if you had planned on that amount sustaining you, for the rest of your life.

  10. It doesn’t explain what rationale legislators used.

    You have elected officials and government officials acting in collusion to promote their interests at the expense of the taxpayers.

  11. Pensions should be based on base pay and averaged over many more years than the last three

    Yes. Counting overtime, unused vacation days and the rest makes no sense.

    1. It makes perfect sense if you are the recipient. Simple math tells one that they get more that way. Would you refuse to do it?

    2. What pensions should be based on is what both sides of the contract have agreed to.
      Why is it so hard to understand that this is a contract and that government, least of all, should not be able to renege on that?

  12. “Meanwhile, the CalPERS pension fund is more than $139 billion in the red, ”

    Actually, this understates the issue, because it ignores a significant amount of pensions that aren’t in the CalPers fund.

    “Californians now owe nearly $200 billion for pensions promised to state and local government workers”

    1. “Meanwhile, the CalPERS pension fund has been receiving shortages of required payments, by the various government agencies, that has it in a situation that it is more than $139 billion in the red, ”
      There: FIFY

  13. The real problem is that no pension system is sustainable over time, just like Social Security. Governments either go broke or hide the problem with an infusion of taxes, increased borrowing, and sometimes an increase in contributors. Even private pension systems have these same issues, look at the auto, trucking, and airline pensions that have had similar problems. All of these pensions should be converted into 401K or similar individual retirement accounts.

    1. I wish I could improve my credit score by promising to shove a gun in the temple of people at some time in the future.

      1. Absolutely. At least the private pension systems don’t have the same relief valves as the government pensions, namely increased taxation, but the individual pensioner is the one that suffers. Union leaders and pension managers are all well paid and either made poor investments or failed to address the problem until it became a crisis.

        I like your strafing run video. Pretty cool!

    2. That;s defined contribution versus defined benefit.

      Future promises of payment are worth only the paper they’re written on.

      The private sector jettisoned defined benefit plans decades ago when they saw the writing on the wall.

      The one stroke change that we could make to make this all go away would be to modify the IRC so that anything of value an employee receives from and employer is taxable compensation. Watch how fast things would adjust all around when there were no such thing as a non-taxed fringe benefit. Health care costs would be one of the major ones. Retirement plans as well. Those are the two, largest cost items after salaries and wages for any large employer.

      In my local government agency, “benefits” both government mandated like Worker’s Comp and Social Security, and non-taxed compensation like health care insurance and defined contrbitution retirement, are running at 92% of salaries over all.

      Out in the real world, where I used to work for a fortune 200, benefits costs in excess of 40% of salaries were verboten. We simply would have cut or eliminated them to stay in this range.

      See the disparity?

      It’s so easy to spend other people’s money.

    3. Stick to social darwinism and leave finances alone.
      If sufficient money is placed in an investment account, the earnings can produce whatever amount is planned for, in perpetuity. That’s the basis of retirement accounts, whether public or private.
      Even the vaunted 401K account, must have enough in it, at a sufficient rate of investment return to pay out for the life of the holder.
      $1,000,000 in an account that pays 7.5% will give the holder $75,000 a year and not touch the investment.
      Social Security isn’t sustainable because the money is not invested, but goes down the rat-hole that is government spending.

  14. OT: proggy GF has lost her mind. I mean, she seems bright and sane, until politics come up. She is completely besides herself because of Romney=SOS. You know, Romney the rino who introduced universal health insurance? That Romney. Apparently, if you are not a far left moron, then you are evil. You’re not wrong, or misguided, or have different priorities. Nope you’re pure evil.
    Gonna trade her in for one a little less… crazy.

    1. A liberal friend who I’ve talked to about it would be pretty reassured by him appointing Romney at this point (though he’s pretty moderate and never thought Romney was the devil or anything like that). Romney would obviously be very far down the list if I was picking a SOS, but as I said above, if it means that Giuliani or Bolton don’t get the job then I can’t complain too much.

      1. Actually that was in a different thread. Lost track of tabs.

      2. ” if it means that Giuliani or Bolton don’t get the job ”

        Wait! Get your hands on the wall and assume the position.

    2. I hear about couples whose politics are not aligned, and I just can’t imagine it.

      1. It’s easy enough, if you don’t talk about politics and don’t turn it into a substitute for tribe or religion.

    3. I’m guessing she wasn’t one of the ones claiming that they regretted crying wolf with Romney, because he was actually ok and for real this time Trump is Hitler? Or did that just get memory holed?

  15. Like alot of these issues, I blame TV. Everyone knows from watching prime time TV and Hallmark movies that government workers like teachers and police are underpaid and overworked, doing thankless tasks because of their inherent nobility and depth of character. Who would dare taint these saints by quibbling over mere money ? Why shouldn’t a policeman in New Hampshire be able to retire at age 45 after working 20 years ? Haven’t you seen Tom Selleck in Blue Bloods ?

    1. That and everything goes to shit over time. Now if they were allowed to go tits up, restructure or disappear, you might be able to avoid the real problem. The real problem being more and more implicit violence introduced into a closed system. If your pension is untouchable even though it’s underfunded, you’ve guaranteed violence at some point. Greece comes to mind.

    2. Pretty much. 99% of the average person’s interaction with police is watching them on the propaganda box.

  16. If they actually wanted to cut payments, they could easily just levy a special tax on state pensions. They could even craft it so it mostly hit the double-dipping six-figure-earning folks.

    They’d rather fuck their customers than their employees. We should encourage them to secede so we don’t have to clean up after the collapse.

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  18. Gee, pity the poor Reason reader in a situation like this. On the one hand: for the government to unilaterally void a contract and expropriate agreed-upon compensation to people who have performed an agreed-upon service is straight-up theft, right? But on the other hand: we hate all government employees, so screw them, right? And with Donald Trump now our president, a contract is worth nothing, because (a) we don’t want to pay for a functioning judicial system and (2) constraining powerful corporate or governmental entities to honor their contracts is just more “job killing regulation.” Welcome to Somalia. Enjoy the sunshine.

    1. Hey Steve:

      It’s not voiding a contract. Employment is at will in most cases. Seldom contracted. The pension is only a part of one’s total compensation. Employers are allowed to adjust as necessary.

      Sorry bub. There are no guarantees in life. Not even insanely lucrative government pensions.

      1. I think you will find that most, if not all, public employment is not “at will”.
        Employment contracts are regularly negotiated and agreed upon – and that is the key, they must be agreed to by both sides.
        Check the Constitution’s Article 1, Section 10. The Founders guaranteed that states couldn’t pass laws that impaired the obligation of contracts. Sounds like as close as our system gets to a guarantee.
        I guess one of the freedoms you love is to be able to screw over fellow citizens because you don’t like the job they do or how much they get paid.

    2. “for the government to unilaterally void a contract and expropriate agreed-upon compensation”

      I don’t think the taxpayers ever agreed to pay them these ludicrous, unsustainable pensions. That’s the problem with public sector unions: there’s nobody at the bargaining table who represents the taxpayers. You just have the workers and the management, and neither of them have any incentive to keep the compensation packages at a realistic level.

      1. I’ve got news for you: one side of the bargaining table doesn’t want to give the other whatever they want.
        The politicians don’t buy votes by saying they have the highest paid government employees, they buy them with the kind of money they save by not giving it to the employees.
        I won’t argue that the politicians don’t give taxpayers the concern they should, but, having been involved in contract negotiations, I can tell you, it ain’t like so many claim.

  19. That you, Dunphy?

  20. Who,or what was it that created this problem of seemingly run away “public pension debt”?

    1. See my pervious post with link to summary article.

      Gray Davis, prison guard union and later, all police and fire unions. And after that, all public employee unions. That’s just in CA.

      Then, the other states start to follow.

      It is the real domino theory.

  21. “In California, the cities of Stockton and Vallejo have gone through bankruptcy to deal with pension costs”

    Right and wrong. It was the growing pension costs that were sinking Vallejo – the town I live in – and set up the bankruptcy. But, the bankruptcy didn’t cure the problem. Due to the California Rule you cite here, Vallejo chose not to fight CalPERS and try and cut back on the police and firefighter pensions. Instead, they laid off police and fire personnel.

    Even today, CalPERs required contributions for Vallejo police and firefighter pensions make up more than 50% of Vallejo’s operating budget. One of the major financial magazines – Forbes? – ran an article about this predicting that Vallejo would be bankrupt again within five years. I spoke to the City Manager about this and he is in denial. In fact, in his budget introduction of two years ago, he blasted CalPERS as being the boogeyman holding Vallejo back because their demands for pension contributions were continuing to grow. He didn’t even acknowledge that the growth in payments was still not enough to cover the liability because CalPERS was using such unrealistic assumptions about ROI rates.

    I wish that Reasons’ Government Reform folks would come to Vallejo and raise hell. They can use this as a model for what other government agencies can do to get things back on track.

    1. You, and your neighbors, voted for the politicians, who instituted this system. Probably ones from the past, who knew they wouldn’t be around when the bill came due.
      In most cases, pension increases came about because there was an effort to hold down cost, then, by denying pay increases and send the problem to the future. If you want to return to what the system was before the pension increase, the fairness says you need to make good on the raises, that those employees gave away.
      One thing is for sure – the employees made every contribution to the system they were required to and deserve no blame for the shortfall that your leaders have caused.
      If your employer, or the people you did business with, came, long after the fact and told you that promised compensation is not going to be paid, and that a “reasonable” amount would be substituted, I have no doubt you would scream bloody murder. But because you don’t like public employees, it is OK to do it to them.
      What an asshole!

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  23. “The California rule” is nothing of the sort. It is a Constitutional requirement, or prohibition, if you will, that:
    “No State shall… pass any … Law impairing the Obligation of Contracts, …” Article 1, Section 10.
    The employment agreement is a contract between employer and employee. Contracts cannot be changed unilaterally – both sides must agree.
    Improvements in pensions were enacted, with the approval of the employees, or their recognized representatives, frequently in exchange for current wage increases. Diminishing of those benefits must be similarly approved. They have not.
    These contract cannot, by the U.S. Constitution, be impaired by state law.
    The ridiculous inclusion of “reasonable” is simply judicial fiat, of a kind libertarians should reject, out of hand.

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